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What do we pay for, anyway?

If you have a little righteous indignation left after hearing about AIG executives and Bernie Madoff, I have a candidate for you: William McGuire, former CEO of the health insurance company United Health Group, Inc.

T.R. Reid — a veteran Washington Post correspondent and host of the "Frontline" documentary "Sick Around the World" — says when McGuire left his company in 2006, he received a "platinum parachute" worth $1.1 billion. That amount dwarfs the compensation of anyone in the financial services or oil industries, Reid says, making McGuire's the largest package ever in corporate America.

America's for-profit health care system is expensive, fragmented, and, by many measures, failing. But as Reid points out, reducing administrative costs is key to a national health care system that works. And other countries are proving it can be done.

According to the World Health Organization, we spend more on health care per capita than any other country, yet we rank 37th in overall health care.

Fox News reported in 2004 that Americans are significantly less satisfied with their health care system than citizens of Australia, Canada, New Zealand, or the U.K. Additionally, we are exposed to more out-of-pocket payments than any of those countries.

Other countries cover the health care needs of their populace, and for less money.

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How do they do it?

In late March, I went to see Reid at Bemis Public Library in Littleton, where he talked about his new book, "Healing of America: A Global Quest for Better, Cheaper, and Fairer Health Care" (Penguin Press, August 2009). Reid pointed out that we already have systems in place that are much like those in other countries that have health care that works. Our veterans are covered in a system much like Britain's. Medicare patients already use a system like Canada's. And it's not all socialized medicine, either. Those whose employers pay for most of the costs use a system much like France's. Germany actually has less government involvement in health care than the U.S. does.

So why are they able to cover anyone at a lower cost? Because they have chosen one system for everyone, Reid says. By avoiding our crazy-quilt of forms, payments and varied systems, they can get their administrative costs between 2.5 percent and 5 percent.

By comparison, costs in the U.S. are between 18 percent and 25 percent. If we could get our administrative costs down, Reid points out, we could save as much as $7 billion, enough to cover America's uninsured.

In the U.S., 20,000 people die each year from preventable diseases. Reid tells of a young woman who had lupus and couldn't afford the medication. She would have lived to 80 in other industrialized countries, he said. Here, she died a young woman.

Additionally, people in other countries don't go bankrupt from medical bills. According to a study by Harvard Medical School, 28.3 percent of the bankruptcies in 2001 resulted from illness or injury. David Himmelstein, an associate professor of medicine and one of the authors of the study, says, "If you're sick enough long enough, you're in deep trouble in our society."

The money that Americans pay for administrative costs goes to three main places:

• Companies pay large sums for marketing costs;

• Companies employ hundreds of underwriters who decide who to cover and how to save money on clients' care.

• Huge salaries.

Which brings us back to William McGuire and his stratospheric "platinum parachute" of $1.1 billion. McGuire, by all evidence, was a good businessman. The shares of his company, UnitedHealth, increased dramatically, pleasing stockholders. Yet his customers weren't quite so happy. According to the American Customer Satisfaction Index, his company scored a middling 68 in 2006, the year he left. The industry average was a 72. Even the U.S. Postal Service scored a 71.

For these billions of dollars we give to for-profit insurance companies to spend on marketing, underwriting and executive salaries, we are not getting actual health care services. We are essentially paying people to sell us insurance and then fight us on paying claims while they give high-ranking execs large salaries.

When the health care debate heats up, take a look at what is done in other countries. They have better overall outcomes and lower costs. In the U.S., we need to talk about out how to cut administrative costs, not hide behind a misguided notion that what we have is the best possible.

The alternative is to keep paying executives millions of dollars to keep us in 37th place in the world in health care.

Ellen Mackey (emackey61@yahoo.com) is a librarian in Littleton. She was a member of the 2007 Colorado Voices panel.

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